Hsse and smarter planet 201200722 v4

IBM University Programs worldwide, accelerating regional development (IBM Upward) The Human Side of Service Engineering & Smarter Planet IBM Centennial Icon of Progress Smarter Planet T-shaped PeopleDr. James (“Jim”) C. Spohrer, spohrer@us.ibm.comInnovation Champion and Director IBM UPward(University Programs worldwide, accelerating regional development)Association of Human Factors & Ergonomics & HSSE 2012San Jose State University, San Jose, CA, USA, Sunday July 22, 2012 © 2012 IBM Corporation

Today’s Talk  HSSE Challenges – The “Big Four” in Crisis – How did we get here?  Seeing Service Systems More Clearly – Through the Lens of Quality-of-Life – What is Quality-of-Life?  Human Side of Service Engineering (HSSE) – Empowering People To See & Improve Service Systems – Some Scientific Foundations  Why Cities Are Important – Holistic Product-Service Systems – “Whole Service” & Quality-of-Life  Why Universities Are Important – Because They Are Mini-Cities!!! – Holistic Product-Service Systems  Thank-You’s2 IBM UPward (University Programs worldwide – accelerating regional development) © 2012 IBM Corporation

Challenges: Human Side of Service Engineering (HSSE)  The “Big Four” in Crisis – Financial – Healthcare – Education – Government3 IBM UPward (University Programs worldwide – accelerating regional development) © 2012 IBM Corporation

Evert Gummesson: Rise of ServiceHuman Activity Shifts: Sociotechnical System Evolution Relationship Networks Estimated world (pre-1800) and then U.S. Labor Percentages by Sector 120 100 Services (Info) 80 Services (Other) 60 Industry (Goods) Agriculture 40 Hunter-Gatherer 20 0 A A A A 50 00 50 00 00 50 Y Y Y Y 18 18 19 19 0 20 20 0 0 00 00 00 00 20 00 10 20 20 Estimations based on Porat, M. (1977) Info Economy: Definitions and Measurement The Company of The Pursuit of Strangers : A Natural Organizational History of Economic Intelligence, Life by James G. March by Paul Seabright Exploitation vs exploration4 IBM UPward (University Programs worldwide – accelerating regional development) © 2012 IBM Corporation

Human Population: Sociotechnical System Evolution Information Technologies, etc. Scientific Method, Industrialization Colonial Expansion & Economics, Rise of the modern managerial firm & Politics, Education, Healthcare & Effects of Agriculture, Shadows in the Sun, The Visible Hand: The by Wade Davis Managerial Revolution in “Ethnosphere. sum total of all the thoughts, beliefs, myths, and American Business institutions brought into being by the by Alfred Dupont Chandler human imagination”5 IBM UPward (University Programs worldwide – accelerating regional development) © 2012 IBM Corporation

Economic Shift in National Economies World’s Large Labor Forces US shift to service jobs A = Agriculture, G = Goods, S = Service 2010 2010 Nation Labor % WW A % G % S % 40yr Service Growth (A) Agriculture: Value from China 25.7 49 22 29 142% harvesting nature India 14.4 60 17 23 35% (G) Goods: U.S. 5.1 1 23 76 23% Value from making products Indonesia 3.5 45 16 39 34% (S) Service: Brazil 3.0 20 14 Daryl Pereira/Sunnyvale/IBM@IBMUS, 66 61% Value from IT augmented workers in smarter systems Russia 2.4 10 21 69 64% that create benefits for customers and sustainably improve quality of life. Japan 2.2 5 28 67 45% Nigeria 1.6 70 10 20 19% Bangladesh 2.1 63 11 26 37% Germany 1.4 3 33 64 42% NationMaster.com, International Labor Organization Note: Pakistan, Vietnam, and Mexico now larger LF than Germany6 IBM UPward (University Programs worldwide – accelerating regional development) © 2012 IBM Corporation

Growth of Service Revenue at IBM 2010 Pretax Income Mix Revenue Growth by Segment SYSTEMS (AND FINANCING)SOFTWARE 17% Services 44% Software 39% Systems SERVICES IBM Annual ReportsWhat do IBM Service Professionals Do? Run IT & enterprise systems for customers,help Transform customer processes to best practices, and Innovate with customers.7 IBM UPward (University Programs worldwide – accelerating regional development) © 2012 IBM Corporation

From Sociotechnical Systems to Smarter Service Systems INSTRUMENTED INTERCONNECTED INTELLIGENT We now have the ability People, systems and We can respond to changes to measure, sense and objects can communicate quickly and accurately, see the exact condition and interact with each and get better results of practically everything. other in entirely new by predicting and optimizing PRODUCTS ways. IT NETWORKS COMMUNICATIONS for future events.WORKFORCE SUPPLY CHAIN TRANSPORTATION BUILDINGS8 IBM UPward (University Programs worldwide – accelerating regional development) © 2012 IBM Corporation

Priorities: Succeeding through Service Innovation - A Framework for Progress (http://www.ifm.eng.cam.ac.uk/ssme/) Source: Workshop and Global Survey of Service Research Leaders (IfM & IBM 2008) IBM University Programs worldwide, accelerating regional development (IBM Upward) 1. Emerging demand 2. Define the domain 3. Vision and gaps 4. Bridge the gaps 5. Call for actions Service Service Service Stakeholder The white paper offers a starting point to - Innovation Systems Science Priorities Growth in service Customer-provider To discover the Education GDP and jobs interactions that underlying enable value principles of Skills Develop programmes Service quality cocreation complex service & Mindset & qualifications & productivity systems Dynamic Research Environmental configurations of Systematically Encourage an Knowledge friendly & resources: people, create, scale and interdisciplinary & Tools approach sustainable technologies, improve systems organisations and Urbanisation & information Foundations laid Business aging population by existing Employment Increasing scale, disciplines Develop and improve & Collaboration Globalisation & complexity and service innovation technology drivers connectedness of Progress in Government roadmaps, leading to a service systems academic studies doubling of investment Opportunities for and practical tools Policies in service education businesses, B2B, B2C, C2C, & Investment and research by 2015 governments and B2G, G2C, G2G Gaps in knowledge individuals service networks and skills Glossary of definitions, history and outlook of service research, global trends, and ongoing debate © 2012 IBM Corporation

Priorities: Research Framework for the Science of Service Pervasive Force: Leveraging Technology to Advance Service Strategy Development Execution Priorities Priorities Priorities Fostering Service Stimulating Effectively Branding Infusion and Growth Service Innovation and Selling Services Improving Well-Being Enhancing the Service Enhancing through Experience through Service Design Transformative Service Cocreation Optimizing Measuring and Creating and Maintaining Service Networks Optimizing the Value of a Service Culture and Value Chains Service Source: Global Survey of Service Research Leaders (Ostrom et al 2010)10 IBM UPward (University Programs worldwide – accelerating regional development) © 2012 IBM Corporation

Why is it hard to see service systems clearly? Design/ Cognitive Science Systems Engineering “service science is “a service system is athe transdisciplinary study of human-made system to improve service systems & provider-customer interactions value-cocreation” and value-cocreation outcomes, by dynamically configuring resource Marketing access via value propositions, most often studied by many disciplines, one piece at a time.” The ABC’s: The provider (A) and a customer (B) transform a target (C) Computer Science/ Artificial Intelligence Economics & Law Operations 11 IBM UPward (University Programs worldwide – accelerating regional development) © 2012 IBM Corporation

Our ambition is to reach K-12 students with Service Science & STEM:“The systems we live in, and the systems we are…”  Challenge-based Project to Design Improved Service Systems – K - Transportation & Supply Chain Systems – 1 - Water & Waste Recycling that focus on Flow of things – 2 - Food & Products (Nano) – 3 - Energy & Electric Grid – 4 – Information/ICT & Cloud (Info) Systems – 5 - Buildings & Construction that focus on – 6 – Retail & Hospitality/Media & Entertainment (tourism) and Human Activities Development – 7 – Banking & Finance/Business & Consulting – 8 – Healthcare & Family Life/Home (Bio) – 9 – Education /Campus & Work Life/Jobs & Entrepreneurship (Cogno) – 10 – City (Government) Systems that focus on – 11 – State/Region (Government) Governing – 12 – Nation (Government) – Higher Ed – T-shaped depth added, cross-disciplinary project teams – Professional Life – Adaptive T-shaped life-long-learning & projects “Imagine smarter systems, explain why better (service systems & STEM language)” STE(A)M = Science, Technology, Engineering, (Arts) and Mathematics See NAE K-12 engineering report: http://www.nap.edu/catalog.php?record_id=12635 See Challenge-Based Learning: http://www.nmc.org/news/nmc/nmc-study-confirms-effectiveness-challenge-based-learning12 IBM UPward (University Programs worldwide – accelerating regional development) © 2012 IBM Corporation

“Service is the application of competence [knowledge] for the benefit of another entity.”Seeing Our World And Us Vargo,SL & RF Lusch (2004). Evolving to a new dominant logic for marketing. Journal of Marketing, 68, 1 – 17. Ha rt sP Pa art H as Building Smarter Cities = Natural Systems Service Systems Apply Service Systems Planetary Systems Knowledge To Realize Benefits water, electricity, transportation, education, healthcare, etc. Be ts n ef i n ef i ts Be Carbon Capabilities, Footprint Experience (Choices) (Choices) Quality of Life13 IBM UPward (University Programs worldwide – accelerating regional development) © 2012 IBM Corporation

California Human Development Report 2011:Measuring quality-of-life…. http://www.measureofamerica.org/docs/APortraitOfCA.pdf14 IBM UPward (University Programs worldwide – accelerating regional development) © 2012 IBM Corporation

What improves Quality-of-Life? Service System Innovations * = US Labor % in 2009. A. Systems that focus on flow of things that humans need (~15%*) 20/10/10 1. Transportation & supply chain 2/7/4 2. Water & waste recycling/Climate & Environment2/1/1 7/6/1 3. Food & products manufacturing 1/1/0 4. Energy & electricity grid/Clean Tech 5/17/27 5. Information and Communication Technologies (ICT access) B. Systems that focus on human activity and development (~70%*) 1/0/2 6. Buildings & construction (smart spaces) (5%*) 24/24/1 7. Retail & hospitality/Media & entertainment/Tourism & sports (23%*) 2/20/24 7/10/3 (wealthy) (21%*) 8. Banking & finance/Business & consulting 5/2/2 9. Healthcare & family life (healthy) (10%*) 10. Education & work life/Professions & entrepreneurship (wise) (9%*) 3/3/1 C. Systems that focus on human governance - security and opportunity (~15%*) 0/0/0 11. Cities & security for families and professionals (property tax) 1/2/2 12. States/regions & commercial development opportunities/investments (sales tax) 0/19/0 13. Nations/NGOs & citizens rights/rules/incentives/policies/laws (income tax) Quality of Life = Quality of Service + Quality of Jobs + Quality of Investment-Opportunities “61 Service Design 2010 (Japan) / 75 Service Marketing 2010 (Portugal)/78 Service-Oriented Computing 2010 (US)”15 IBM UPward (University Programs worldwide – accelerating regional development) © 2012 IBM Corporation

Sciences underlying HSSE Service Science Transdiscipline Foundations Disciplines Professions Phenomena: Run Past Present FutureValue-Cocreation Operators & Maintain Historical Studies: Future Studies: Research Anthrop, Economics & Law Stakeholders & Resources & Design & Mgmt of Innovation Transform Challenges Measures Access Rights Consultants Managers HumantesSocialScience Arts-Decision Sciences Customer & Quality People & PA Concepts & Marketing Psychology, Design Innovate Questions Behavioral Sciences Cognitive Sciences Scientists & Designers Provider & Productivity Technology & OO Tools & Operations Research & Mgmnt Indust. & Systems Engineering Work & Job Category Methods Management Sciences Engineering Sciences Evolution Authority & Compliance Information & SA Governance & Policymaking Management of Info Systems Political Sciences Computer & Info Sciences Rule Innovations Tech Innovations Competitors & Sust. Innov. Organizations & LC Strategy/Game Theory Project Management Contracts Learning Sciences Organization Science From: Spohrer, J. & Maglio, P. P. (2009). Service science: Toward a smarter planet. In W. Karwowski & G. Salvendy (Eds.), Introduction to service engineering. NY: Wiley. 16 IBM UPward (University Programs worldwide – accelerating regional development) © 2012 IBM Corporation

Service Science and Policymaking  EN: FN(PRW) -> {RE} – Entities – Frameworks – Problems – Recommendations From: Spohrer, J, P Piciocchi, CBassano (2012). Three Frameworks for Service Research: Exploring Multilevel Governance in Nested, Networked Systems. Service Science 4:147-16017 IBM UPward (University Programs worldwide – accelerating regional development) © 2012 IBM Corporation

Service Science: Conceptual Framework Ecology (Populations & Diversity) Entities Interactions Outcomes (Service Systems, both (Service Networks, (Value Changes, bothIndividuals & Institutions) link, nest, merge, divide) beneficial and non-beneficial) Identity Value Proposition Governance Mechanism Reputation (Aspirations & Lifecycle/ (Offers & Reconfigurations/ (Rules & Constraints/ (Opportunities & Variety/ History) Incentives, Penalties & Risks) Incentives, Penalties & Risks) History) Access Rights Measures (Relationships of Entities) (Rankings of Entities) lose-win win-win prefer sustainable lose-lose win-lose non-zero-sum Resources Stakeholders outcomes, (Competences, Roles in Processes, (Processes of Valuing, i.e., win-win Specialized, Integrated/Holistic) Perspectives, Engagement)  Resources: People, Organizations, Technology, Shared Information  Resources: Individuals, Institutions, Infrastructure, Information  Stakeholders: Customers, Providers, Authorities, Competitors  Measures: Quality, Productivity, Compliance, Sustainable Innovation  Access Rights: Own, Lease, Shared, Privileged Spohrer, JC (2011) On looking into Vargo and Luschs concept of generic actors in markets, or “Its all B2B …and beyond!” Industrial Marketing Management, 40(2), 199–201. 19 IBM UPward (University Programs worldwide – accelerating regional development) © 2012 IBM Corporation

~250 years of infrastructure transformations Installation Crash Deployment Irruption Frenzy Synergy Maturity • Formation of Mfg. industry 1 The Industrial 1771 Panic • Repeal of Corn Laws 1829 Revolution 1797 opening trade • Standards on gauge, time Age of Steam Panic 2 and Railways 1829 1847 • Catalog sales companies 1873 • Economies of scale Age of Steel, Depressio • Urban development 3 Electricity 1875 n • Support for interventionism 1920 1893 and Heavy Engineering • Build-out of Interstate Age of Oil, Crash 4 Automobiles 1908 1929 highways 1974 • IMF, World Bank, BIS and Mass Production Coming period of Age of Information Credit Crisis 5 and 1971 2008 Institutional Adjustment and Production Capital Telecommunications Source: Carlota Perez, Technological Revolutions and Financial Capital: The Dynamics of Bubbles and Golden Ages; (Edward Elar Publishers, 2003).22 IBM UPward (University Programs worldwide – accelerating regional development) © 2012 IBM Corporation

~100 years of US job transformations Source: US Bureau of Economic Analysis; McKinsey Global Institute Analysis23 IBM UPward (University Programs worldwide – accelerating regional development) © 2012 IBM Corporation

We need better frameworks, theories, and models of… Four I’s Cultural Information – Infrastructure (Quality-of-Life Measures) – Individuals – Institutions – Information Individuals Institutions Four Measures (Skills) (Rules, Jobs) – Innovativeness – Equity – Sustainability Societal Infrastructure – Resiliency (Technologies & Environment)24 IBM UPward (University Programs worldwide – accelerating regional development) © 2012 IBM Corporation

26 IBM GMU External Relations 2012

University: Four Missions Nation Knowledge State/Province – 1. Transfer (Teaching) City/Metro For-profits U-BEE – 2. Creation (Research) Job Creator/Sustainer – 3. Application (Benefits) Cultural & University Hospital Medical Conference College Research • Commerce/Entrepreneurship Hotels K-12 • Governance/Policymaking Worker Family – 4. Re-Integration (Challenge) Non-profits (professional) (household) • Innovativeness, Equity • Sustainability, Resilience Nested, Networked Holistic Service Systems – Flows Third Mission (Apply to Create Value) – Development is about U-BEEs = – Governance University-Based Entrepreneurial Ecosystems 33 IBM UPward (University Programs worldwide – accelerating regional development) © 2012 IBM Corporation

Nations compete and cooperate: Universities important% WW GDP and % WW Top-500-Universities (2009 Data) 9 Japan 8 7 y = 0,7489x + 0,3534 R² = 0,719 China 6 Germany 5 France 4 United Kingdom Italy % G D o b P a g l 3 Russia Brazil Spain Canada 2 India Mexico South Korea Australia Turkey Netherlands 1 Sweden 0 0 1 2 3 4 5 6 7 8 9 % top 500 universities34 IBM UPward (University Programs worldwide – accelerating regional development) © 2012 IBM Corporation

What are the benefits of more education? Of higher skills? …But it can be costly, American student loan debt is over $900M35 IBM UPward (University Programs worldwide – accelerating regional development) © 2012 IBM Corporation

~30 years of skill transformations: depth & breadth 15 10 Expert Thinking 5 Complex Communication 0 Routine Manual Non-routine Manual -5 Routine Cognitive -10 1969 1974 1979 1984 1989 1994 1999 Levy, F, & Murnane, R. J. (2004). The New Division of Labor: How Computers Are Creating the Next Job Market. Princeton University Press.36 IBM UPward (University Programs worldwide – accelerating regional development) © 2012 IBM Corporation

T-shaped professionalsdepth & breadth Many cultures Many disciplines Many systems (understanding & communications) BREADTH Deep in one discipline Deep in one system Deep in one culture DEPTH (analytic thinking & problem solving)3737 IBM UPward (University Programs worldwide – accelerating regional development) © 2012 IBM Corporation

Systems-Disciplines Framework: Depth & Breadth systems Systems that focus on flows of things Systems that support people’s activities Systems that govern transportation & ICT & retail & healthcare food & education city state nation disciplines supply chain water & energy products & electricity cloud building & hospitality banking & family &work secure scale laws waste construction & finance behavioral sciences Customerstakeholders e.g., marketing Provider management sciences e.g., operations Observe Stakeholders (As-Is) political sciences Authority e.g., public policy learning sciences Competitors e.g., game theory and strategy cognitive sciences People e.g., psychologyresources system sciences Technology e.g., industrial eng. information sciences Observe Resource Access (As-Is) Information e.g., computer sci organization sciences Organizations e.g., knowledge mgmt History social scienceschange e.g., econ & law (Data Analytics) decision sciences Imagine Possibilities (Has-Been & Might-Become) Future e.g., stats & design (Roadmap) run professions Run e.g., knowledge worker Transformvalue (Copy) transform professions e.g., consultant Realize Value (To-Be) Innovate innovate professions (Invent) e.g., entrepreneur 38 IBM UPward (University Programs worldwide – accelerating regional development) © 2012 IBM Corporation

Working with universities-cities worldwide A long term investments to develop talent & skillsGovernment Global Placements & Collaboration withPartnerships Mentoring Universities Transferring knowledge and IBM works with 5,000 universitiesBy helping governments to and 10,000 faculties around theestablish new national expertise to the growth markets is critical. One of the ways we do this globe. We have joint initiativesresearch facilities, we are and investments with universitieshelping to create new is to move experts into the market to in Vietnam, Malaysia, India,industries, helping to develop coach and train local teams. Russia, Brazil, Bulgaria, Egypt,long terms skills curriculums China and Africa to encouragelike SSME. the training of skills required. 39 IBM GMU External Relations 2012

I am nested in at least 10 systemsLevel AKA ~No. People ~No. Entities Example0. Individual Person 1 10,000,000,000 Jim1. Family Household 10 1,000,000,000 Spohrer’s2.Neighborhood Street 100 100,000,000 Kensington3. Community Block 1000 10,000,000 Bird Land4. Urban-Zone District 10,000 1,000,000 SC Unified5. Urban-Center City 100,0000 100,000 Santa Clara6.Metro-Region County 1,000,000 10,000 SC County7. State Province 10,000,000 1,000 CA8. Nation Country 100,000,000 100 USA9. Continent Union 1,000,000,000 10 NAFTA10. Planet World 10,000,000,000 1 UN41 IBM UPward (University Programs worldwide – accelerating regional development) © 2012 IBM Corporation

A Framework for Global Civil Society  Daniel Patrick Moynihan said nearly 50 years ago: "If you want to build a world class city, build a great university and wait 200 years." His insight is true today – except yesterdays 200 years has become twenty. More than ever, universities will generate and sustain the world’s idea capitals and, as vital creators, incubators, connectors, and channels of thought and understanding, they will provide a framework for global civil society. – John Sexton, President NYU42 IBM UPward (University Programs worldwide – accelerating regional development) © 2012 IBM Corporation

~14B Evolution of Natural Systems & Service Systems ~10KBig Bang Cities (Natural Unraveling the mystery of evolving hierarchical-complexity in new populations… (Human-Made Time World) To discover the world’s architectures and mechanisms for computing non-zero-sum World) writing (symbols and scribes, stored memory and knowledge) written laws ECOLOGY (governance and stored control) sun (energy) money earth (governed (molecules & transportable valuestored energy) stored value, “economic energy”) bacteria(single-cell life) bees (social sponges transistor division-of-labor)(multi-cell life) (routine cognitive work) universities (knowledge workersclams (neurons) printing press (books 44 IBM UPward (University Programs worldwide – accelerating regional development) © 2012 IBM Corporationtrilobites (brains) 200M 60 steam engine (work)

Visit IBM Almaden Research Center, San Jose, CA Upcoming Conferences – July 2012 • ISSS San Jose • HSSE San Francisco More Information – Blog • www.service-science.info – Twitter • @JimSpohrer – Presentations • www.slideshare.net/spohrer – Email • spohrer@us.ibm.com 46 IBM UPward (University Programs worldwide – accelerating regional development) © 2012 IBM Corporation

Thank-You! Questions? “Instrumented, Interconnected, Intelligent – Let’s build a Smarter Planet.” – IBM “If we are going to build a smarter planet, let’s start by building smarter cities” – CityForward.org “Universities are major employers in cities and key to urban sustainability.” – Coalition of USU “Cities learning from cities learning from cities.” – Fundacion Metropoli “The future is already here… It is just not evenly distributed.” – Gibson “The best way to predict the future is to create it/invent it.” – Moliere/Kay “Real-world problems may not/refuse to respect discipline boundaries.” – Popper/Spohrer “Today’s problems may come from yesterday’s solutions.” – Senge “History is a race between education and catastrophe.” – H.G. Wells “The future is born in universities.” – Kurilov “Think global, act local.” – GeddesDr. James (“Jim”) C. SpohrerInnovation Champion &Director, IBM University Programs & open worldwide entrepreneurship research (IBM UPower) WWspohrer@us.ibm.com 47 IBM UPward (University Programs worldwide – accelerating regional development) © 2012 IBM Corporation

IBM’s Leadership Changes IBM has 426,000 employees worldwide 2011 Financials 22% of IBM’s revenue  Revenue - $ 106.9B in Growth Market  Net Income - $ 15.9B countries; growing at 11% in 2011  EPS - $ 13.44  Net Cash - $16.6B More than 40% of IBM’s workforce conducts business away from an office 55% of IBM’s WorkforceIBM operates in 170 is New to the company incountries around the globe the last 5 years Number 1 in patent generation for 19100 Years of Business consecutive years ;& Innovation in 2011 6,180 US patents awarded in 2011 The Smartest Machine On Earth 9 time winner of the 5 Nobel President’s National Laureates Medal of Technology & Innovation - latest “Let’s Build a Smarter award for Blue Gene Planet" Supercomputer 48 IBM UPward (University Programs worldwide – accelerating regional development) © 2012 IBM Corporation

Service systems entities learn to apply knowledge Learning To Apply Knowledge Do It Invent It Exploitation Exploration Run Transform Innovate Operations L Internal Incremental Maintenance Copy It External Radical Insurance Interaction Super-Radical March, J.G. (1991) Exploration and exploitation in organizational learning. Organizational Science. 2(1).71-87. Sanford, L.S. (2006) Let go to grow: Escaping the commodity trap. Prentice Hall. New York, NY.49 IBM UPward (University Programs worldwide – accelerating regional development) © 2012 IBM Corporation

Service Science: Conceptual Framework Ecology (Populations & Diversity) Entities Interactions Outcomes (Service Systems, both (Service Networks, (Value Changes, bothIndividuals & Institutions) link, nest, merge, divide) beneficial and non-beneficial) Identity Value Proposition Governance Mechanism Reputation (Aspirations & Lifecycle/ (Offers & Reconfigurations/ (Rules & Constraints/ (Opportunities & Variety/ History) Incentives, Penalties & Risks) Incentives, Penalties & Risks) History) Access Rights Measures (Relationships of Entities) (Rankings of Entities) lose-win win-win prefer sustainable lose-lose win-lose non-zero-sum Resources Stakeholders outcomes, (Competences, Roles in Processes, (Processes of Valuing, i.e., win-win Specialized, Integrated/Holistic) Perspectives, Engagement)  Resources: Individuals, Institutions, Infrastructure, Information  Resources: People, Organizations, Technology, Information  Stakeholders: Customers, Providers, Authorities, Competitors  Measures: Quality, Productivity, Compliance, Sustainable Innovation  Access Rights: Own, Lease, Shared, Privileged Spohrer, JC (2011) On looking into Vargo and Luschs concept of generic actors in markets, or “Its all B2B …and beyond!” Industrial Marketing Management, 40(2), 199–201. 50 IBM UPward (University Programs worldwide – accelerating regional development) © 2012 IBM Corporation

Service Systems Thinking: ABC’s Example Provider: College (A) A B Example Target: Student (C) Discuss: Who is the Customer (B)? A. Service Provider Forms of Service Relationship B. Service Customer - Student? They benefit… • Individual (A & B co-create value) • Individual - Parents? They often pay… • Institution • Institution • Public or Private - Future Employers? They benefit… • Public or Private - Professional Associations? Forms of Service Interventions - Government, Society? (A on C, B on C) Forms of Responsibility Relationship (A on C) C Forms of Ownership Relationship (B on C) C. Service Target: The reality to be transformed or operated on by A, for the sake of B • Individuals or people, dimensions of • Institutions or business and societal organizations, organizational (role configuration) dimensions of • Infrastructure/Product/Technology/Environment, “Service is the application of physical dimensions of • Information or Knowledge, symbolic dimensions competence for the benefit of another entity.” Spohrer, J., Maglio, P. P., Bailey, J. & Gruhl, D. (2007). Steps Vargo, S. L. & Lusch, R. F. (2004). Evolving to a new toward a science of service systems. Computer, 40, 71-77. dominant logic for marketing. Journal of Marketing, 68, 1 – 17. From… Gadrey (2002), Pine & Gilmore (1998), Hill (1977)51 IBM UPward (University Programs worldwide – accelerating regional development) © 2012 IBM Corporation

Service system entities configure four types of resources Rights No-Rights  First foundational premise of 2. Technology/ • People/ service science: Physical Environment Individuals – Infrastructure Service system entities dynamically configure four types of resources 4. Shared – Resources are the building Not-Physical 3. Organizations/ Information/ blocks of entity Institutions Symbolic architectures Knowledge  Named resources are: – Physical or Formal service systems can contract to configure resources/apply competence – Not-Physical Informal service systems can promise to configure resources/apply competence – Physicist resolve disputes Trends & Countertrends (Balance Chaos & Order):  Named resources have: (Promise) Informal <> Formal (Contract) – Rights or (Relationships & Attention) Social <> Economic (Money & Capacity) – No Rights (Power) Political <> Legal (Rules) – Judges resolve disputes (Evolved) Natural <> Artificial (Designed) (Creativity) Cognitive Labor <> Information Technology (Routine) (Dance) Physical Labor <> Mechanical Technology (Routine)Spohrer, J & Maglio, P. P. (2009) (Relationships) Social Labor <> Transaction Processing (Routine)Service Science: Toward a Smarter Planet. (Atoms) Transportation <> Communication (Bits)In Introduction to Service Engineering. (Tacit) Qualitative <> Quantitative (Explicit)Editors Karwowski & Salvendy. Wiley. Hoboken, NJ.. (Secret) Private <> Public (Shared) (Anxiety-Risk) Challenge <> Routine (Boredom-Certainty) (Mystery) Unknown <> Known (Justified True Belief)52 IBM UPward (University Programs worldwide – accelerating regional development) © 2012 IBM Corporation

Service system entities calculate value from multiple stakeholderperspectives Value propositions coordinate & motivate resource access  Second foundational premise of service science Stakeholder Measure Pricing Basic Value Perspective Impacted Decision Questions Proposition – Service system entities calculate (the players) Reasoning value from multiple stakeholder perspectives – Value propositions are the building 1.Customer Quality Value Should we? Model of customer: Do blocks of service networks (Revenue) Based (offer it) customers want it? Is there a market? How large? Growth rate?  A value propositions can be viewed as a request from one service system to another to run an algorithm (the value Productivity Cost Model of self: Does it play to 2.Provider Can we? proposition) from the perspectives of (Profit, Mission, Plus our strengths? Can we deliver (deliver it) multiple stakeholders according to Continuous it profitably to customers? culturally determined value principles. Improvement, Can we continue to improve? Sustainability)  The four primary stakeholder perspectives are: customer, provider, 3.Authority Compliance Regulated May we? Model of authority: Is it legal? authority, and competitor (Taxes and (offer and Does it compromise our Fines, Quality integrity in any way? Does it – Citizens: special customers deliver it) of Life) create a moral hazard? – Entrepreneurs: special providers – Parents: special authority – 4.Competitor Sustainable Strategic Will we? Model of competitor: Does it Criminals: special competitors Innovation (invest to put us ahead? Can we stay (Substitute) (Market make it so) ahead? Does it differentiate share) us from the competition? Spohrer, J & Maglio, P. P. (2009) Service Science: Toward a Smarter Planet. In Introduction to Service Engineering. Editors Karwowski & Salvendy. Wiley. Hoboken, NJ..53 IBM UPward (University Programs worldwide – accelerating regional development) © 2012 IBM Corporation

Service system entities reconfigure access rights to resources by mutually agreed to value propositions  Third foundational premise of service Competitor Provider Customer Authority science S P C A – Service system entities reconfigure access rights to resources by mutually agreed to value propositions (substitute) OO OO – Access rights are the building blocks of LC LC the service ecology (culture and information) SA SA  Access rights PA PA value-proposition – Access to resources that are change-experience owned outright (i.e., property) dynamic-configurations – Access to resource that are time leased/contracted for (i.e., rental car, home ownership via mortgage, insurance policies, etc.) – Shared access (i.e., roads, web service = value-cocreation information, air, etc.) B2B B2C – Privileged access (i.e., personal thoughts, inalienable kinship B2G relationships, etc.) G2C provider resources G2B customer resources Owned Outright G2G Owned Outright C2C Leased/Contract C2B Leased/ContractSpohrer, J & Maglio, P. P. (2009)Service Science: Toward a Smarter Planet. Shared Access C2G Shared AccessIn Introduction to Service Engineering. Privileged Access *** Privileged AccessEditors Karwowski & Salvendy. Wiley. Hoboken, NJ..54 IBM UPward (University Programs worldwide – accelerating regional development) © 2012 IBM Corporation

Service system entities interact to create ten types of outcomes ISPAR descriptive model  Four possible outcomes from a two player game lose-win win-win Win (coercion) (value-cocreation) Provider lose-lose win-lose Lose (co-destruction) (loss-lead) Lose Win Customer  ISPAR generalizes to ten possible outcomes – win-win: 1,2,3 – lose-lose: 5,6, 7, maybe 4,8,10 – lose-win: 9, maybe 8, 10 – win-lose: maybe 4Maglio PP, SL Vargo, N Caswell, J Spohrer: (2009) The service system is the basic abstraction of service science. Inf. Syst. E-Business Management 7(4): 395-406 (2009)55 IBM UPward (University Programs worldwide – accelerating regional development) © 2012 IBM Corporation

Service system entities learn to systematically exploit technology:Technology can perform routine manual, cognitive, transactional work “Try to Learning Systems (“Choice & Change”) “Double operate monetize, inside internal win the Exploitation Exploration (James March) (James March) and ‘sell’ to comfort external” zone” Run/Practice-Reduce Transform/Follow Innovate/Lead (IBM) (IBM) (IBM) Operations Costs L Internal Incremental “To be the best, Maintenance Costs learn from External Radical the rest” Incidence Planning & Interactions Super-Radical Response Costs (Insure) March, J.G. (1991) Exploration and exploitation in organizational learning. Organizational Science. 2(1).71-87. Sanford, L.S. (2006) Let go to grow: Escaping the commodity trap. Prentice Hall. New York, NY.56 IBM UPward (University Programs worldwide – accelerating regional development) © 2012 IBM Corporation

Service system entities are physical-symbol systems  Service is value cocreation.  Service system entities reason about value.  Value cocreation is a kind of joint activity.  Joint activity depends on communication and grounding.  Reasoning about value and communication are (often) effective symbolic processes. Newell, A (1980) Physical symbol systems, Cognitive Science, 4, 135-183. Newell, A & HA Simon(1976). Computer science as empirical inquiry: symbols and search. Communications of the ACM, 19, 113-126.57 IBM UPward (University Programs worldwide – accelerating regional development) © 2012 IBM Corporation

Summary Rights No-Rights • People/ 2. Technology/ Physical Individuals Infrastructure 3. Organizations/ 4.. Shared Not-Physical Institutions Information 1. Dynamically configure resources (4 I’s) 4. Ten types of outcomes (ISPAR) Stakeholder Measure Pricing Questions Reasoning Perspective Impacted 1.Customer Quality Value Should we? Model of customer: Do Based customers want it? 2.Provider Productivity Cost Can we? Model of self: Does it Plus play to our strengths? 3.Authority Compliance Regulated May we? Model of authority: Is it legal? 4.Competitor/ Sustainable Strategic Will we? Model of competitor: Innovation Does it put us ahead? Substitutes 2. Value from stakeholder perspectives 5. Exploit information & technology S P C A 3. Reconfigure access rights 6. Physical-Symbol Systems Spohrer, J & Maglio, P. P. (2009) Service Science: Toward a Smarter Planet. In Introduction to Service Engineering. Editors Karwowski & Salvendy. Wiley. Hoboken, NJ..58 IBM UPward (University Programs worldwide – accelerating regional development) © 2012 IBM Corporation

Service Management:Learning More Operations, Strategy,About Service Systems… and Information Technology  Fitzsimmons & Fitzsimmons By Fitzsimmons and – Graduate Students Fitzsimmons, UTexas – Schools of Engineering & Businesses  Teboul – Undergraduates – Schools of Business & Social Sciences Service Is Front Stage: – Busy execs (4 hour read) Positioning services for  Ricketts value advantage – Practitioners By James Teboul, INSEAD – Manufacturers In Transition  And 200 other books… Reaching the Goal: – Zeithaml, Bitner, Gremler; Gronross, Chase, Jacobs, Aquilano; Davis, Heineke; Heskett, Sasser, Schlesingher; Sampson; Lovelock, Wirtz, Chew; Alter; How Managers Improve Baldwin, Clark; Beinhocker; Berry; Bryson, Daniels, Warf; Checkland, Holwell; Cooper,Edgett; Hopp, Spearman; Womack, Jones; Johnston; Heizer, Render; a Services Business Milgrom, Roberts; Norman; Pine, Gilmore; Sterman; Weinberg; Woods, Degramo; Wooldridge; Wright; etc. Using Goldratt’s  URL: http://www.cob.sjsu.edu/ssme/refmenu.asp Theory of Constraints  More Textbooks: By John Ricketts, IBM http://service-science.info/archives/193159 IBM UPward (University Programs worldwide – accelerating regional development) © 2012 IBM Corporation

 Our planet is a complex system-of-systemsOur planet is a complex, dynamic, highly interconnected$54 Trillion system-of-systems (OECD-based analysis) This chart shows ‘systems‘ (not ‘industries‘) Communication Transportation $ 3.96 Tn $ 6.95 Tn Education $ 1.36 Tn Water $ 0.13 Tn Leisure / Recreation / Electricity Clothing $ 2.94 Tn $ 7.80 Tn Global system-of-systems $54 Trillion (100% of WW 2008 GDP) Healthcare $ 4.27 Tn Infrastructure Legend for system inputs $ 12.54 Tn Note: Same Industry 1. Size of bubbles represents Business Support systems’ economic values IT Systems 2. Arrows represent the strength of Energy Resources systems’ interaction Machinery Finance Food Govt. & Safety 1 Tn Materials Source: IBV analysis based on OECD $ 4.58 Tn $ 5.21 Tn $ 4.89 Tn Trade60 IBM UPward (University Programs worldwide – accelerating regional development) © 2012 IBM Corporation

 We now have the capabilities to manage a system-of-systems planetEconomists estimate, that all systems carry inefficienciesof up to $15 Tn, of which $4 Tn could be eliminated This chart shows ‘systems‘ (not ‘industries‘) Analysis of inefficiencies in the 40% planet‘s system-of-systems Healthcare Global economic value of Improvement potential as % of system inefficiency 4,270 35% Building & Transport 34% System-of- $54 Trillion Infrastructure Education systems 100% of WW 2008 GDP 12,540 1,360 Financial Electricity 42% 30% 2,940 4,580 Inefficiencies $15 Trillion 28% of WW 2008 Food & Water GDP 4,890 25% Communication Government & Safety Improvement $4 Trillion 3,960 5,210 potential 7% of WW 2008 GDP Transportation (Goods & Passenger) 6,950 20% Leisure / Recreation / Note: Size of the bubble indicate Clothing absolute value of the system in USD 15% 7,800 Billions How to read the chart: 15% 20% 25% 30% 35% 40% 45% For example, the Healthcare system‘s System inefficiency as % of total value is $4,270B. It carries an estimated inefficiency of 42%. From that level of 42% economic value inefficiency, economists estimate that ~34% can be eliminated (= 34% x 42%). Source: IBM economists survey 2009; n= 48061 IBM UPward (University Programs worldwide – accelerating regional development) © 2012 IBM Corporation

The New Normal: Smarter Systems Service Systems: Stakeholders & Resources 1. People 2. Technology 3. Shared Information 4. Organizations Computational System connected by win-win value propositions Smarter Technology Smarter Buildings, Universities, Cities Requires investment roadmap Requires investment roadmap62 IBM UPward (University Programs worldwide – accelerating regional development) © 2012 IBM Corporation

Normann: Reframing Business  Reframing Business: When the Map Changes the Landscape  Richard Normann  Value-Creating Systems63 IBM UPward (University Programs worldwide – accelerating regional development) © 2012 IBM Corporation

Deacon: Incomplete Nature  Incomplete Nature: How Mind Emerged From Matter  Terrence W. Deacon  Thermodynamics -> Teleodynamics (purpose- driven system dynamics)  Purpose = map64 IBM UPward (University Programs worldwide – accelerating regional development) © 2012 IBM Corporation

Knowledge: Individuals & Society Herbert Simon: Ben Jones: Bounded Rationality Burden of Knowledge65 IBM UPward (University Programs worldwide – accelerating regional development) © 2012 IBM Corporation

Sustainability/Resilience & Innovation: Local-p global-i supply chains World as System of Systems World (light blue - largest) Nations (green - large) States (dark blue - medium) Cities (yellow - small) Universities (red - smallest) Cities as System of Systems Developed Market -Transportation & Supply Chain Nations -Water & Waste Recycling (> $20K GDP/Capita) -Food & Products ((Nano) -Energy & Electricity -Information/ICT & Cloud (Info) -Buildings & Construction Emerging Market -Retail & Hospitality/Media & Entertainment Nations -Banking & Finance (< $20K GDP/Capita) -Healthcare & Family (Bio) -Education & Professions (Cogno) -Government (City, State, Nation) Nations: Innovation Opportunities - GDP/Capita (level and growth rate) - Energy/Capita (fossil and renewable)67 IBM UPward (University Programs worldwide – accelerating regional development) © 2012 IBM Corporation

Universities Worldwide Accelerating Regional Development “When we combined the impact of Harvard’s direct spending on payroll, purchasing and construction – the indirect impact of University spending – and the direct and indirect impact of off-campus spending by Harvard students – we can estimate that Harvard directly and indirectly accounted for nearly $4.8 billion in economic activity in the Boston area in fiscal year 2008, and more than 44,000 jobs.”68 IBM UPward (University Programs worldwide – accelerating regional development) © 2012 IBM Corporation

Regional Competitiveness and U-BEEs:Where imagined possible worlds become observable real worldshttp://www.service-science.info/archives/1056Innovations NationUniversities/ “The future is already State/Province here (at universities),Regions City/RegionCalculus (Cambridge/UK) For-profits it is just not evenlyPhysics (Cambridge/UK) U-BEEComputer Science (Columbia/NY) distributed.”Microsoft (Harvard/WA) Job Creator/SustainerYahoo (Stanford/CA) Hospital Cultural & UniversityGoogle (Stanford/CA) Medical Conference CollegeFacebook (Harvard/CA) Research Hotels K-12 “The best way to Non-profits Worker (professional) Family (household) predict the future is to (inspire the next generation of students to) build it better.” U-BEEs = University-Based Entrepreneurial Ecosystems, City Within City 69 IBM UPward (University Programs worldwide – accelerating regional development) © 2012 IBM Corporation

A Game of Life: Essentials Game = board with squares & rules – Infrastructure both Environmental and Technological • PS (Physical Systems - Environment) – Natural Endowment (hidden & observable information) • PSS (Physical Symbol Systems – Environment & Technology) – Biological PSS (observable information – DNA, RNA, proteins, etc.) – Technological PSS (observable information – states of system, bits, etc.) Life = multiple generations of entities – Entities = SSE (Service System Entities) • Individuals with Competencies & Life-Spans – Competencies (vary with age) – Life-Spans (vary with stage) • Institutions with Roles & Rules Rights No-Rights 2. Technology/ – Roles (Competency-Levels and Pay-Levels) 1. People/ Environmental Physical Individuals – Rules (Compliance-Levels and Tax-Levels) Infrastructure 3. Organizations/ 4. Shared Not-Physical Institutions Information 1. Dynamically configure resources (4 I’s)72 IBM UPward (University Programs worldwide – accelerating regional development) © 2012 IBM Corporation

Life = Multiple Generations of Entities (200 years = 10 generations x 20 years)Pedagogy: Ten Social-Technological-Economic-Environmental-Political (STEEP) StagesThought Experiment: Binary-Board-Space (Rule: Toggles Each Generation) 1. Hunter-Gatherer Knowledge-Value Economy 1 - 2K population (20 people/sq mile * 100 sq miles) 2. Transition Hunter-Gatherer Knowledge-Value Economy 2 - 4K population (40 people/sq mile * 100 sq miles) 10 miles 3. Agricultural Knowledge-Value Economy 1 - 8K population (80 people/sq mile * 100 sq miles) 4. Transition Agricultural Knowledge-Value Economy 2 In Use - 16K population (160 people/sq mile * 100 sq miles) Rule: 5. Manufacturing Knowledge-Value Economy 1 Toggles Each Generation - 32K population (320 people/sq mile * 100 sq miles) 6. Transition Manufacturing Knowledge-Value Economy 2 Recycle - 64K population (640 people/sq mile * 100 sq miles) 7. Service-Information Knowledge-Value Economy 1 - 128K population (1,280 people/sq mile * 100 sq miles) 8. Transition Service-Information Knowledge-Value Economy 2 - 256K population (2,560 people/sq mile * 100 sq miles) 9. Sustainable-Innovation Knowledge-Value Economy 1 - 512K population (5,120 people/sq mile * 100 sq miles) 10. Transition Sustainable-Innovation Knowledge-Value Economy 2 - 1024K population (10,240 people/sq mile * 100 sq miles)  And beyond!73 IBM UPward (University Programs worldwide – accelerating regional development) © 2012 IBM Corporation

Game = Board with Squares & RulesExample: Possible STEEP Stages 9 & 10 (infrastructure, sustainable-innovation cities)  Imagine nested holistic product-service-systems entities… Occupied – 10 Continents/planet (In Use) 11 Systems Toggle each generation – 20 year cycle – 10 Nations/continent – 10 States/nation transportation – 10 Cities/state water – 4 Sectors/city (interconnect to others) food/products – 11 Systems/sector energy  Rules: Board-space toggles each generation ICT – 20 years/generation buildings/family – New infrastructure/generation R&H/M&E/C&S Sector 1 Sector 2 finance city state  World: Further Pedagogical Purposes interconnect interconnect – “World Simulator” benchmarking health – Search to accelerate learning education Sector 3 Sector 4 • 10,000 city experiments/generation governance nation continent • Low skill/raw materials > Hi-talent/tech interconnect interconnect – Each generation new outcomes • Talents (skills & jobs) Recycling • Technologies (recycle & rebuild) (De-construction & • Investments (script & performance) Re-construction) 74 IBM UPward (University Programs worldwide – accelerating regional development) © 2012 IBM Corporation

Entities = Life-Cycle ScriptExample: Possible STEEP Stages 9 & 10 (individuals, multiple generations of entities)  Children – Age 0-20 – (Local & Global) Grow, Learn, & Have Fun  Parents – Age 20-40 (offspring 2) – (Next Local) Reproduce, Raise Children, & Build New “City” SET Stage  Grand-Parents – Age 40-60 (offspring 4) – (Local) Run the “City” You Built & Connect with Family  Great-Grand-Parents – Age 60-80 (offspring 8) – (Global) Travel the World, Enjoy Experiences, & Share Ideas  Great-Great-Grand-Parents – Age 80-100 (offspring 16) – (Local) Return, Reconnect, and Document History & Future Plans  Great-Great-Great-Grand-Parents – Age 100-120 (offspring 32) – (Local & Global) Celebrate, Tell Stories, Depart & Explore Further Realms75 IBM UPward (University Programs worldwide – accelerating regional development) © 2012 IBM Corporation

The Game of Life: Service Science Framework  The Game Board: A configuration of PS (Physical Systems), with interspersed PSS (Physical Symbol Systems) and SSE (Service System Entities). – The SSE are PSS are PS – The infrastructure is PS + PSS • The PS have hidden information (state) • The PSS have observable information (state and read-write) – The SSE use information to co-create value • World model – information about the world (The Game Board) • Self model – information about self (SSE) • The SSE have a beginning and an end (life-cycle) • The SSE judge quality-of-life across their life-cycle – The game is each generation of SSE try to improve quality-of-life, by improving the capabilities of the infrastructure (less waste, more support for SSE activities) and the capabilities of the SSE to co-create value (an SSE activity) – The starting game board consists of PS with a few PSS, and the goal is to see how quickly and with how little energy and with how few types and tokens of PS, the PSS can become SSE and reconstruct a high level infrastructure and high quality of life and continuously improve at a sustainable pace. • Processes of valuing are based on the above76 IBM UPward (University Programs worldwide – accelerating regional development) © 2012 IBM Corporation

Hsse and smarter planet 201200722 v4

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